Abstract
Internet of things is developing at a dizzying rate, and companies are forced to implement it in order to maintain their operational efficiency. The high flexibility inherent to these technologies makes it necessary to apply an appropriate measure, which properly assesses risks and rewards. Real options methodology is available as a tool which fits the conditions, both economic and strategic, under which investment in internet of things technologies is developed. The contribution of this paper is twofold. On the one hand, it offers an adequate tool to assess the strategic value of investment in internet of things technologies. On the other hand, it tries to raise awareness among managers of internet of things technologies because of their potential to contribute to economic and social progress. The results of the research described in this paper highlight the importance of taking action as quickly as possible if companies want to obtain the best possible performance. In order to enhance the understanding of internet of things technologies investment, this paper provides a methodology to assess the implementation of internet of things technologies by using the real options approach; in particular, the option to expand has been proposed for use in the decision-making process.
Highlights
Internet of ThingsIn recent years, companies have had to face extreme competition because of changes in technological and global issues
The results show that the investment in IoT is an excellent strategic option despite the challenges which it may pose to individual companies
The implementation of digital technology in companies has been defined as a new technological scenario where a network of global information may constitute a source of competitive advantage
Summary
Internet of ThingsIn recent years, companies have had to face extreme competition because of changes in technological and global issues. Companies can anticipate future trends by developing new concepts (ideas, products, or services) which allow them to differ from competitors by offering their customers a tailor-made experience. This ability may prove to be considered crucial for the development of a sustainable competitive advantage [3]. A real option involves, for a given period, the possibility to take future decisions on real investments without committing oneself in advance [5] They can be defined as the right, but not the obligation, to take future strategic decisions (e.g., to defer, expand, abandon, reduce, or otherwise alter a capital investment) [6]. If through the life of the project events become different from those originally predicted, real options represent the possibility of taking decisions which can increase profitability or reduce losses [7,8]
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